1. Field of the Invention
The present invention relates to wireless point-of-sale transactions. More specifically, the present invention relates to using a wireless device to conduct a transaction over a wide area network.
2. Background of the Invention
The dominant form of electronic payment today is a magnetic stripe credit card. With these types of cards, the purchaser or the merchant swipes the magnetic stripe through a reader. The magnetic stripe contains account information and other pieces of security code and identification that is captured in the swiping process. This information is sent through the merchant's point-of-sale systems through terrestrial networks. Depending on what type of payment product is used, the information may go through a VISA router, MASTERCARD router, etc., until it ultimately ends up at a payment processor that represents the bank that issued the payment product. The payment processor runs logic behind the scenes to validate that the credit card is an authorized card and that there is either sufficient money in the bank account or a sufficient credit line to support that transaction. The payment processor then returns an authorization code back through the terrestrial networks to the merchant systems to either approve or decline the transaction.
Electronic payments are slowly migrating from the magnetic stripe to a contactless or near-field-communication (NFC) transaction. Contactless transacting is likely to be the dominant form for mobile payments in the future. As these types of transactions gain popularity, there are hardware modifications in the basic scheme that the merchant must make. Typically this requires either changing out certain parts of their point-of-sale devices or getting an add-on reader. This is basically an NFC reader that plugs in to the signature capture devices that exist today. However, this reader is a costly endeavor for a lot of merchants. Current pricing for these readers is around $140 per point-of-sale device just for the hardware. Beyond the hardware, there are software and firmware upgrades that must be accomplished for such a system. These are costly investments for the merchant which many merchants will deem unnecessary as long as the current system works.
Mobile telephones may be used with these NFC readers. The way the industry is going now where the merchant requires this additional piece of hardware, the additional piece of hardware acts as the reader. The hardware generates a magnetic field such that when the mobile telephone is moved into close proximity of that magnetic field the mobile telephone detects that magnetic field either through the energy provided by that field or by the battery of the phone. The mobile telephone powers up a special purpose radio and transmits the payment or other credentials. The point-of-sale device recognizes the mobile telephone and associates it with a source of funds. Once the point-of-sale device has captured the payment credentials, the payment is processed over the terrestrial network in a similar fashion to that described above for a magnetic stripe transaction. However, this is expensive for the merchant.
What is needed is a way to effect mobile payments at the point-of-sale without requiring the merchant to make such a costly investment.